A,B,C D are partners sharing profit in the ratio 2:4:3:1. c retires and for this purpose goodwill is valued at two year purchase of average super profits of last four years ,which were as under

1 year 40000

2 year 10000(loss)

3 year 100000

4 year 150000

the normal profit of the similar firm is rs56000.

pass necessary journal entry for goodwill on retirement of c.

Dear Student,
First, Calculate average profit =40,000-10,000+1,00,000+1,50,0004=2,80,0004=70,000
Secondly, difference of average profit and normal profit is Super Profit.
Super Profit = Average Profit - Normal Profit = 70,000 - 56,000=14,000
Goodwill is valued at 2 years purchase of super profits
Therefore, Goodwill = 14,000×2= 28,000
Hope this answers your query.
Keep posting for further doubts!!

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